Stimulus plan can help small businesses thrive
By Jean Wojtowicz
The Fort Wayne Journal Gazette - May 22, 2009
This is National Small Business Week, recognizing that small companies employ 70 percent of all workers. That fact explains the focus on small business in the federal stimulus package. Provisions in the recovery plan passed by Congress and signed by President Obama build more muscle into the government's small business financing arm, the Small Business Administration. Using more than $700 million in stimulus money, the SBA is reducing loan fees, expanding parameters on popular loan programs and paying businesses to save energy.
Savvy Indiana small business owners and commercial bankers can help speed their own – and their communities' – economic recovery by becoming expert in these changing programs.
For example, the SBA's popular 504-loan program allows businesses to buy fixed assets such as land, buildings and equipment. Stimulus money is widening the parameters of the 504 loans to include a limited amount of refinancing. A borrower planning a $1 million fixed-asset expansion can add an additional $500,000 of refinancing for other fixed-asset debt, making the total project $1.5 million. The details of this provision should be announced soon.
The SBA is paying two fees often paid by borrowers. At the present loan volumes, this fee suspension will likely last until Dec. 31.
The SBA just announced it established a pool of $255 million with stimulus money solely for businesses to use to make payments on existing qualified bank loans. The idea is for companies to stay current on their financing until they can repay loans out of profits.
This program, referred to as ARC loans (America's Recovery Capital), will provide $35,000 SBA-guaranteed loans through banks to help business borrowers keep current on their other debt. The repayment terms are very generous. These loans will be available beginning June 15.
Going green is also part of the stimulus strategy. The SBA raised the ceiling on loans through the 504 program to $4 million for firms that buy, build or retrofit facilities that result in 10 percent energy reduction. The maximum is still $1.5 million for 504 borrowers that cannot demonstrate energy savings.
Taking full advantage of these new opportunities can be a good test of the borrower-lender relationship because the stimulus package does not alter the traditional role of commercial lenders; we are in business to make good loans, and sometimes this means we must say "no." However, if we use the stimulus package tools correctly, Indiana communities will be the winners.